Commission Notes Rail Freight Is Greener


Amazing. The Productivity Commissions acknowledges that rail freight is a greener alternative to road freight.

That won’t go down well in some quarters.

It’s released an “issues” paper today in international freight and is calling for public submissions.

It says in backgrounding rail freight locally that KiwiRail’s objective is to operate as a successful business including covering its operating costs
and earning a return on capital. However, KiwiRail is not generating enough commercial revenue to fully cover its costs and currently relies on capital grants and operating subsidies from the taxpayer.
“Rail freight offers a cheaper alternative to road freight in some instances particularly for long-distance bulk goods and imports and exports from the major ports. Arguably it is a ‘greener’ alternative to road transport in terms of relieving congestion and lower emissions.”

On road freight, the issues paper quotes a 2010 Treaury report that “While road users in general cover the
costs of road infrastructure, the prices they face are only approximately related to the use they make
of that infrastructure.”
It notes that there is very limited use of tolls to pay for infrastructure investment and despite some congestion problems mainly in urban areas, there has been no use to date of congestion charges.

The Commission the paper is important because better performance in freight transport should result in lower prices for imported goods, higher profits for exporting industries, and quicker freight turnaround – benefiting importers, exporters, employees and consumers.

And it opens up a can of worms.
It asks whether council ownership is getting in the way of ports and airports performing more efficiently to help exporters and importers. It asks whether ports need to be more collaborative and innovative to improve performance, which is lagging behind that of ports in some other countries.




  1. Donald Neal says:

    “It asks whether council ownership is getting in the way of ports and airports performing more efficiently to help exporters and importers.”

    Well, one obvious test would be whether the degree of council ownership makes a difference. Port of Tauranga would on that basis behave in a way that was visibly different from a wholly local authority owned entity.

    Possibly the more important question is how decisions vital to ports are made. Given limited money available, is a third track within Auckland more important than electrification through the Kaimai tunnel? And who really decides?

    Is local authority lobbying of central government vital to the future of a port?

  2. George D says:

    Luckily, this government doesn’t care.

    Pollute! Wreck the planet! It doesn’t matter, so long as we can pump more dollars in!

  3. Graham says:

    Have a look at the conclusions of John Bolland’s study (April 2010) for the Ministry of Transport on the Economic Costs and Benefits of Rail Freight. One is that there is a case for investment in rail because of the resulting savings in resource costs. Another is that the short-run marginal cost of rail is about half that of road on average and for only a few minor lines of business is road cheaper than rail.

  4. Matt says:

    Graham, what’s the long-run marginal cost look like? I’m sure it’s incredibly good compared to road, but I’m wary of jumping to that conclusion.


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